NEA's New Chairman: "Mercurial"

The NEA has a new Chairman: Rocco Landesman. Here is a nice profile of him from the NYTimes.

Highlights of the story for me were the following:

His leadership style: smart, decisive and “a very entertaining person to be around,” but also “mercurial,” “unpredictable” and “an extraordinarily hardheaded businessman.” I'm always interested in leadership style - and particularly like the word "mercurial" meaning "subject to sudden or unpredictable changes of mood or mind; sprightly, lively" when we perhaps typically think of good leaders as the antonymous stable or steadfast.

His branding with a slogan: The new chairman said he already has a new slogan for his agency: “Art Works.” It’s “something muscular that says, ‘We matter.’ ” The words are meant to highlight both art’s role as an economic driver and the fact that people who work in the arts are themselves a critical part of the economy. As for the former agency slogan, “A Great Nation Deserves Great Art,” he said, “We might as well just apologize right off the bat.” Really interesting - illustrating the undertones of a slogan - equating the language of appealing to what we deserve to an apologetic nature.

He must be reading Richard Florida: “When you bring artists into a town, it changes the character, attracts economic development, makes it more attractive to live in and renews the economics of that town,” he said. “There are ways to draw artists into the center of things that will attract other people.”

His money source for projects: Given the agency’s “almost invisible” budget, he said, goals like these would require public-private partnerships that enlist developers, corporations and individual investors. I like this a lot - my fiscally conservative upbringing still makes me question how much public funding should go into the arts - though not the merit of the art or the importance of it finding alternative funding sources than the traditional market provides - so I'm a big fan of private sources (developers/corporations/investors) trading resources for benefit and creating partnerships.

Trouble with Merchandise Sales

I went to Richmond, Virginia, with the NCTA for a couple days last week for planning meetings for the Richmond Folk Festival. While there, we stopped in a local music store that is an old favorite of my co-workers. The store is apparently not faring well, in part due to the economy, in part because CD sales are down due to the popularity of digital music downloading. Josh spoke to someone working there and reported back to the rest of us this fun fact: To compete with the downloading trend, some of the suppliers have been discounting CDs to only $6 or $7 dollars. The result has been an apparent skyrocket in sales, but only in the 80's hair metal band genre.

Next, during one of the meetings, we were discussing how to drive merchandise sales at the festival. We want to use some kind of incentive to encourage the marginal patron to buy. (Those who want to buy already are, those who don't, won't, but we want to capture the people on the fence about it - right at the margin.) Generally, this is done with price discrimination pricing structures - where the front row theater tickets are still $100, but you can sit up in the balcony for just $30 - so you don't lose the revenue of those willing to pay more, but you capture the "maybe" buyer with the incentive of reduced price tickets. Anyway, the problem with these folk festivals is that admission is free, and CD prices are all set by the artists, not within our jurisdiction to offer at reduced prices. One suggestion was made of offering a prize of a complete set of CDs - one from each artist at the festival - to one lucky winner in a contest you were entered to win with the purchase of any piece of merchandise. Not bad. But not sure that's enough to drive sales. Is there a way to offer incentives to marginal buyers to drive sales, without changing prices?

I'm also wondering why some markets can support $20 for an official poster (the Ann Arbor Street Art Fair), and some struggle to sell many for $5 (Richmond Folk Festival). The merchandise is similar - reproduced from original art work with similar appeal. The easy answer would be in the demographic differences between the audiences, which I don't have enough information about to report on, except that attendees of art fairs are there to purchase things, attendees of free music festivals go in without the expectation of purchasing things. But I wonder if it also has to do with the heritage of the event - the art fair being 50 years old, and the folk fest being 5 - and people kind of "wanting a piece" of something with more lineage? Any other ideas?

Stimulus package - "arts: bonbons for a leftist elite"

I'm back home in Michigan to visit my parents for a bit. I was without internet for a bit, then traveling across Michigan to see friends for another bit, and I am behind on my posting. So back to it.

On Feb 6, the Senate voted to eliminate funding from the stimulus package to help "...museums, theaters and arts centers...." Apparently, some conservatives denounced the arts as "bonbons for a leftist elite." In the final package approved this week, however, $50 million for the National Endowment for the Arts was included, after supporters argued for the economic impact of the arts.

This raises one of our most common questions in arts admin; should the arts get public funding, and why? And to complicate it, during an economic crisis? And to complicate it FURTHER, with the justification of economic impact?

I won't ever agree that the arts are "bonbons" of frivolity to our functioning in society. But in the face of crisis, I understand that perception. If the stimulus package were giving money only to the basics to get things up and running again, I'd say leave the arts out (though I make myself an enemy of my field in doing so). To argue for the economic impact of arts to keep them on the bill, too, has its flaws. The arts rarely cover costs independently; they rely on generous donations and grants. Yes, they employ a lot of people and generate tourism and spending, but so do restaurants, so do athletics. I'm trained to think you can't fund the arts based on their economic impact, because they're then expected to play by those rules that says what makes money deserves to stay, and the arts have always rendered their value outside of economics.

Am I happy I'm going to be paying through the nose for this bill until I'm 80? No. But as long as everything else got money (and there are pork projects on there more frivolous than arts) I guess I'm glad the arts weren't left behind. Though justifying funding the arts through economics is treading on wobbly ground.

NYTimes article on it here:
Saving Federal Arts Funds: Selling Culture as an Economic Force

Airfare and arts: What are you paying for?

I travel around a bit, so I'm on the constant search for cheap flights. I flew over the weekend to Omaha to be with my family for Christmas. I went Southwest, one of my favorites, due to their low and predictable prices. Spirit is also incredibly cheap, offering fares often under $50. Explaining my flight options to my family, someone said, "how can some airlines offer fares so cheap, when others are so expensive?"

I thought for a moment, and knew the answer. Fares are cheap when there is less variety or choice in where and when you fly. You can only fly to a limited number of cities, and/or fly on very specific days. They keep prices low because they ONLY offer what is most cost-efficient for their company to produce, which may mean flights close to their headquarters, or flights between popular cities.

This reminded me of Rushton's explanation about the cost of books (the literary art form). Why are books cheaper in grocery stores or big-lots stores than they are in bookstores? Because the grocery stores only offers the absolute best sellers, a small variety, only what they know will sell and cover its own cost (John Grisham, Mary Higgins Clark, etc). Bookstores, whether small/independent or Barnes & Noble, offer more variety, so prices are higher to cover the cost of stocking lesser-bought books like poetry (they're a bookstore; it's their job to have variety, but they still have to pay for it somehow).

This also applies to performing arts, as explained by Doug Booher. Shows can be more expensive at performing arts centers that have more variety, because the blockbuster shows are underwriting the more experimental shows that don't cover their costs. The same with museums - they bring in the blockbuster special exhibitions that will bring in enough admission fees/sponsorships to cover other smaller or lesser-known but equally artistically important endeavors.

The arts are considered a “mixed commodity” because they are in part a private good – they can be sold to an individual purchaser and their benefits are enjoyed specifically by him (the ticket to a concert, for example). They are also in part a public good, because their presence enriches society as a whole (preservation of collective cultural heritage, prestige and identity conferred upon a body of people, developing aesthetic public tastes, etc, suggested by economists Baumol and Bowen). I might argue many other services are like this that we don't realize; enriching society in the form of options from which we may not individually benefit, but rather benefit indirectly, collectively, simply from their presence. (Example: Do we perceive our country to be more free, mobile, and well-off, if we have seemingly infinite commercial flight options, even if we ourselves do not take advantage of them? And are we as a whole benefited by this mindset? Do we take pride and comfort in knowing we COULD go somewhere if we need or want to, or that our children will have the opportunity to take advantage of these options in the future, contributing to more peace of mind? It may not be tangible, exactly, but the spillover externalities could be far-reaching.)

Point is, in many situations, when you're wondering about the price of something, consider if you're paying ONLY for what you yourself get (private good), or if you're paying for the options you have, or for the availability of lesser-popular offerings, the mere presence of which, it might be argued, enrich society as a whole.

Competition drives innovation

I arrived back in Indiana today via the new airport. I followed the signs to the ground transportation area, also new. I found the trusty old Bloomington Shuttle Service, with the little machine that spits out ticket cards for $25. And surprisingly, next to the kiosk with the familiar logo was a second kiosk with a big new sign that read "Bloomington EXPRESS Shuttle Service," and "Only $15."

Competition.

Hmm... I had to talk to someone about this. What was going on here? Was there a difference between the services? How was the new service suddenly able to so drastically lower the price? Did they have a competitive advantage that made their costs lower? Or had the original shuttle company been making huge marginal profits, and the new company was willing to reduce marginal profit, in favor of volume of sales? Did the second service evaluate the market and decide there was a big share to be had? In what way was the current service not meeting demand? (It seems there is always enough space on the busses.) And what will be the result: Will students gravitate to the new service because it's cheaper, or stay with the old one, because it's familiar and dependable?

The guy at the Express kiosk, of whom I began to ask these questions, was not very helpful. But I gambled on the new one, and got the exact same service, for a lower price. The bus was the same, the stops were even exactly the same. The driver did have to ask the ticket guy how to collect money from passengers with credit cards - he didn't know you can only buy tickets inside, before you get on the bus; so clearly they're still learning the system. They're copying the old service exactly right now.

Competition, but no innovation.

I was interested enough I found their website. It does say they're committed to improving the service, not making it identical to the old one. Their website says "After our trial run [of Thanksgiving weekend] we are working to make it bigger and better," and they welcome your ideas.

So competition drives innovation.

And funny enough, the old shuttle service website says "Bigger is not better when it comes to personalized service..."

So maybe it's a positioning issue, in the 4 P's marketing mix, on a quadrant grid. One will position as low-cost, basic service, the other will position as higher-cost, more personal service. Or maybe you can't really differentiate levels of service on such a straightforward product. So the original will just have to lower prices in order to compete.

The inversion is also true: Innovation drives competition.

I thought about this during the hour-long shuttle ride, before I opened my laptop and watched online episodes of Seinfeld; but that's a topic for a different post.

Next time you're standing at the kiosks thinking, $25 known, $15 unknown, know that they're exactly the same, pre-innovation, anyway.

Social Entrepreneurship

Ever since we sat in on the first couple weeks of a SPEA course called "Social Entrepreneurship," Stephanie and I have been on the lookout for this idea in practice. What is it? Applying business models to social problems, to develop new businesses that are efficient and financially self-sustaining the way a for-profit would be, but tackle solutions to social problems where there is some market failure, like a non-profit would. They figure out a way to do good, and turn a profit, that they reinvest in doing more good.

Examples include Dr. V and Mr. Green who cite the 30 second efficiency, low cost, high volume model that allows McDonalds to serve hamburgers, and applied it to eye cataract surgeries in India. PBS has a very cool series all about social entrepreneurs called The New Heroes. Watch them, they are great videos.

This encompasses two topics: entreprenuerial spirit and social consciousness, both on the rise according to experts, based on a shifting of generations in the work force.

In my Urban Economic Development class with Barry Rubin, there is a high focus on entreprenuerial trends, because starting new, smaller businesses is a great way to generate more jobs in a community (as opposed to first-wave development strategies of "smoke-stack chasing" which involves regions competing to attract large manufacturing plants). It's also the preferred way for up-and-coming smart workers to make a living. Current college graduates are pretty good at thinking outside the box, and are getting more comfortable with risk, creativity, and want ownership over our work.

Patricia Martin calls these people "RenGens," which stands for Renaissance Generation. I found her description fascinating, because I can see how it describes my peer group.

Ren Gens are..."eco-conscious; they ... are willing to accept products that are flawed but authentic rather than slickly produced and inauthentic. They want to make a difference. They want to live many lives. They don’t want to be told, “You can’t be an architect and a poet.” ... Because they are both idealistic and cynical at the same time, they have learned to trust what they experience rather than what experts tell them....They are also incredibly savvy about when they are being marketed to, so you cannot lie to them. "

She suggests that the "RenGen is the largest class of entrepreneurs the United States has seen in a long time. Not only are they driven to do original work, but they are going to want to live that out in originally designed careers. In order to do that, they’ll work hard to create their own enterprises... Their agenda is to collaborate, to connect and to create. They don’t respond to directive. They respond to teaming — where a ...problem is put on the table and everyone can jump in.

I think this is very true. So our two concepts, entreprenuerial spirit and social consciousness, appear to mesh well, creating a trend that may define the work of my generation.